Jersey Desk - CCHR: DOJ Takedown Exposes Over 0 Million Defrauded in Behavioral Mental Health Fraud Schemes

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Thirty-seven mental health, psychiatric, behavioral health, and substance abuse cases reveal alleged false claims, falsified records, kickbacks, and phantom services—patients harmed while providers pocketed luxury gains.

LOS ANGELES - JerseyDesk -- By CCHR International

The U.S. Department of Justice's 2026 National Health Care Fraud Takedown has exposed rampant fraud in mental health, behavioral health, psychiatric, and substance abuse services. As part of a nationwide operation uncovering over $6.5 billion in alleged fraud, 37 cases in these areas represent well over $220–250 million in defrauded funds.[1] The Citizens Commission on Human Rights (CCHR) International warns that these scandals highlight deep systemic failures in the psychiatric and behavioral health industry, where profit-driven motives put vulnerable patients at risk.

Some psychiatric and behavioral health providers repeatedly billed government programs—primarily Medicaid—for services never provided, substandard care, treatment by unqualified staff, and inducing beneficiaries to sign for services they barely or never received. DOJ said providers billed for counseling, therapy, transcranial magnetic stimulation (TMS), or other services on dates when the supposed professionals were out of the country. A number of the schemes the DOJ uncovered involved professionals using defrauded funds for luxury purchases, including real estate, vehicles, jewelry, and a yacht.[2]

"Every fraudulent dollar diverted into a criminal scheme is a dollar unavailable for patient care, for medical innovation, or for services for vulnerable Americans," said Health and Human Services Secretary Robert Kennedy Jr.[3]

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Psychiatric Times estimates between 10% and 20% of state mental health funds—$4 to $8 billion—are lost to fraud, waste, and excess profits to for-profit managed care companies.[4] Mark Schlein, former director of Florida's Medicaid Fraud Control Unit, when investigating massive mental health fraud in the 1990s, advised: "The extent of the fraud is limited only by the imagination."[5]

At a Congressional roundtable on mental health held in March this year, Dr. David Hyman, adjunct scholar at the Cato Institute and Professor of Health Law & Policy at Georgetown Law, described mental health as a "fraud-laced industry." He stated, "If you look at the providers that have been excluded from the Medicare and Medicaid programs, psychiatrists punch well above their weight in terms of their likelihood of being excluded from the program" for engaging in a "variety of these frauds."[6]

Attorney Matthew Curley told Behavioral Health Business, "It's fair to say that enforcement actions and recoveries regarding behavioral health providers are becoming increasingly significant components of the government's overall enforcement efforts."[7]

CCHR, established in 1969 by the Church of Scientology and professor of psychiatry, Thomas Szasz, M.D., has long tracked mental health fraud schemes, briefing healthcare fraud and FBI investigators in the 1990s on common fraud schemes. It uncovered massive fraud in a chain of psychiatric hospitals owned by the now-defunct National Medical Enterprises (NME), which paid over $575 million to settle civil lawsuits and criminal investigations, closing its psychiatric division.[8]

CCHR's 1998 report, Massive Fraud, disclosed fraud schemes that included billing for mental health therapy for a nursing home patient who was in a coma, daily "group therapy" sessions that consisted of giving away free cups of coffee, socializing and listening to music, billing insurers for patient cooking classes and bingo games, and treatment of patients who were dead.

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Today, the rise of telepsychiatry has also exacerbated the problem, with more than 20 states flagging fraud, waste, and abuse concerns in behavioral telehealth services.[9] CCHR calls for whistleblowers to confidentially report observed fraud and abuse in the mental health system.

Jan Eastgate, President of CCHR International, said, "Despite the massive fraud crackdowns of the 1990s that forced psychiatric hospital chains to pay hundreds of millions in settlements and shut down abusive operations, today's DOJ takedown proves the mental health and behavioral industry still cannot police itself. Vulnerable patients—especially children and Medicaid beneficiaries—are being betrayed by certain providers who prioritize luxury profits over patients. Real protections for patients must be put in place."

Greater oversight could help reduce government waste, isolate and eradicate harmful practices and introduce patient protections.

Sources:

[1] Jessica Botelho, "455 people charged in alleged $6.5B healthcare 'fraud schemes': DOJ," Fox SA San Antonio news, 23 June 2026

[2] "Case Summaries 2026 National Health Care Fraud Takedown," U.S. Department of Justice, Criminal Division, 24 June 2026

[3] Jessica Botelho, "455 people charged…."

[4] www.cchrint.org/2024/04/12/cchr-asks-whistleblowers-to-report-mental-health-hospital-fraud-in-the-u-s/

[5] Andrea Orr, "Big Move to Uncover Health Care Fraud," Reuters Business Report, 20 Aug. 1997

[6] "Hidden crisis in US mental health: Why depression and suicide rates are increasing," Mathrubhumi.com, 30 Mar. 2026; "Examining Mental Health in the MAHA Age," COP Committee on Oversight and Government Reform, 26 Mar. 2026

[7] Bailey Bryant, "Providers Beware: Behavioral Health Fraud Investigations, Recoveries on the Rise," Behavioral Health Business, 21 Feb. 2021

[8] www.cchrint.org/2023/02/17/20-billion-in-psychiatric-fraud/

[9] Anuja Vaidya, "Fraud Enforcement Followed Spike in Telemental Care," Informa TechTarget, 24 Nov. 2021